Artificial intelligence (AI) is transforming every industry, with businesses investing heavily to stay ahead. AI-powered software automates simple tasks, increases productivity, and enables decision-makers to make better decisions faster. The enterprise AI software market is expected to grow from $98 billion in 2024 to $391 billion by 2030.
Two companies are at the forefront of AI-powered enterprise software: Palantir Technologies (PLTR) and Microsoft (MSFT). Both stocks have soared, but a recent pullback may be an opportunity for one of them. Here’s which stock is a better buy.
Palantir Accelerates Growth with AI Platform
Palantir makes software that aggregates data from across an enterprise’s operations and derives actionable insights. Its new Artificial Intelligence Platform (AIP) has driven acceleration in Palantir’s results, with revenue growing 29% year-over-year and adjusted operating margin expanding to 39%.
The fourth quarter saw improved results for both revenue growth (36%) and profitability (45%). Management’s outlook for 2025 suggests revenue growth of 31% and an expanded adjusted operating margin. However, Palantir faces headwinds amid growing geopolitical tensions and potential budget cuts for the US government.
Key to its success is its scalable business model with minimal marginal costs. CEO Alex Karp takes a product-first approach, focusing on making excellent products for select clients. AIP has been key to expanding its usefulness for more businesses.
Microsoft Leads on Two Fronts
Microsoft catapulted itself to the forefront of AI discussions when it added $10 billion to its investment in OpenAI in 2023. The company is now a leader on two fronts: cloud computing and enterprise software.
Its cloud computing platform, Azure, saw substantial growth over the last two years as businesses access compute and foundational models on the cloud to develop new AI solutions. Microsoft’s Copilot line of AI assistants has driven growing revenue and expanding margins for its Productivity and Business Processes segment.
Key Data Points:
* Palantir benefits from scale but faces headwinds amid geopolitical tensions.
* Microsoft leads on two fronts: cloud computing and enterprise software, with a more reasonable valuation.
* Microsoft is a better buy than Palantir stock after the recent sell-off in both.
Source: https://www.fool.com/investing/2025/03/16/better-ai-stock-palantir-vs-microsoft